About Takashi Sugiyama

Born in Osaka in 1924, Takashi Sugiyama graduated from Tokyo Imperial University in 1947, with a degree in electrical engineering. He went on to register many patents for inventions and received his doctoral degree in 1970 for his famous thesis, “Pulse Width Modulation Aid Convertery.”

Sugiyama joined Yokogawa Electric Works in 1947 and by 1978 was appointed Executive Vice President. In the late 1970’s Yokogawa began to foray into the medical systems industry under a contract with the American company, GE. By 1982 this contract was declared a formal joint venture between GE and Yokogawa, creating the new Yokogawa Medical Systems (YMS). Sugiyama was appointed president of YMS and this oral history offers his in-depth comments about the balancing of product lines and components within a joint venture, the three-pole system set up by GE, the “just in time” system adopted from Toyota, the GE Tollgate System, capital finance, product growth strategies, and policies on continuing education and advancement for employees. Sugiyama also talks about the problems of technology and knowledge transfer between managers, marketing, R&D, and engineers, and he discusses the two-hats, of technician and engineer, worn by most Japanese engineers. The interview concludes on the advantages and disadvantages of joint ventures, and an eight-page supplement of answers to written questions, given to Sugiyama before the oral interview, is included.

About the Interview

Takashi Sugiyama: An Interview conducted by William Aspray, IEEE History Center, February 18, 1993.

Interview # 148 For the IEEE History Center, The Institute of Electrical and Electronics Engineers, Inc.

Copyright Statement

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It is recommended that this oral history be cited as follows:

Takashi Sugiyama, Electrical Engineer, an oral history conducted in 1993 by William Aspray, IEEE History Center, Hoboken, NJ, USA.

Interview

Interview: Takashi Sugiyama

Interviewer: William Aspray

Place: Tokyo, Japan

Date: February 18, 1993

[Note: Eiju Matsumoto, Curator of the Yokogawa Museum Office, is present at the interview and helps with translation and interpretation. Also note: Sugiyama presented a written reply to the set of questions. This follows the text of the interview.]

Career Trajectory at Yokogawa Electric Works

Aspray:

Why don't we begin with some basic information about your life and career? Can you tell me something about when you were born and what your family was like?

Sugiyama:

I was born in Osaka in 1924. I grew up in an engineering environment. My father was a chief engineer at Mitsubishi Electric Company in Kobe. I joined the University of Tokyo, and in 1947 I graduated from the electrical engineering department of Tokyo Imperial University.

Aspray:

What was the course of study in electrical engineering at that time? Did it emphasis power or electronics?

Sugiyama:

At that time, these departments were quite separate. We learned power electric and wireless communications system, so-called weak electrics.

Aspray:

Upon graduation you joined Yokogawa Electric?

Sugiyama:

Yes.

Aspray:

How did you choose to work for them rather than someone else?

Sugiyama:

First, I wanted to stay in Tokyo. I used many instruments at the department of the university. I liked Yokogawa instruments, oscillographs and some kinds of indicating meters. I wanted to design and manufacture in Yokogawa Electric Works, so I chose Yokogawa Electric Works. That was the number one reason. The second reason was my predecessor's influence. Sometimes I met with Mr. Numazaki. He had already joined Yokogawa Electric Work. He strongly recommended that I join Yokogawa Electric. Then I decided to come.

Aspray:

What was your first job with Yokogawa Electric?

Sugiyama:

At the time, there was no training course. My section manager gave us a special subject, the designing of an electric low-pass filter circuit.

Aspray:

Can you tell me about the various positions you had in the company as the years went by?

Sugiyama:

First I joined the research and development group in 1947, and I designed some kind of filtering system, and then I designed many kinds of electrical instruments, measuring instruments. For example, a vacuum tube voltmeter and peak voltmeters, also using vacuum tubes. The voltmeter was very popular and important at the time.

Aspray:

These were replacing some older kinds of meters?

Sugiyama:

Yes.

Aspray:

Had those older ones used vacuum tubes?

Sugiyama:

Yes. The first ones only used one tube in the voltmeter. We designed then with two or three tubes. They had a more accurate, wider frequency range. We designed them because vacuum tube prices went down very rapidly.

Aspray:

Things must have been very difficult in Japan right after the war.

Sugiyama:

Yes.

Aspray:

How did it affect your workplace?

Sugiyama:

Conditions were not so good. Vacuum tubes were very precious. The working place was very bad and we didn't have air conditioning. Only a stove. But I was young, and it was exciting to devise instruments.

Aspray:

Yes. So you designed a series of these instruments. Then what did you do in the company? Did you move into a management position of a small design team?

Sugiyama:

Yes. Twelve years after graduation I was appointed as section manager. I had ten engineers.

Aspray:

What projects was your team working on?

Sugiyama:

Mainly measuring instruments using vacuum tubes. Then we moved to other projects. Around 1955, the digital voltmeter appeared. We started studying this kind of new digital technique. I am very interested in AD (analog-digital) converter systems. I already had many patents.

Aspray:

Very many.

Sugiyama:

I found a very precise A-D converter system. I wrote a thesis on it. I sent this thesis to the University of Tokyo, and I received a doctorate degree in 1970.

Aspray:

I see. Is that a common way to get a doctorate degree from the university?

Sugiyama:

Yes. In Japan, there are two kinds of doctor degrees. One is by taking graduate courses, but there are other ways. In my case I graduated from the ordinary course of study and while working in public I got my doctorate degree by thesis.

Aspray:

By the thesis.

Matsumoto:

His thesis, Pulse Width Modulation Aid Convertery is very famous.

Aspray:

Yes. Very important technology.

Sugiyama:

I sent this thesis to IEEE. Many letters came to me asking about this thesis. Fortunately, I got a very good team member, Mr. Yamaguchi. He is a very clever guy. He helped me very much.

Aspray:

I see that you were then appointed to General Manager for Research and Development in 1971.

Sugiyama:

Yes, that's right.

Aspray:

Had the company had a major activity in research and development before this time? Or was it growing?

Sugiyama:

Yokogawa was originally a very technology-oriented company. Many famous engineers were there. Especially Dr. Miyaji Tomota. Dr. Tomota was one of my predecessors, and a former president with an engineering background. He held over 400 patents. He's very famous. He's also an IEEE Life Fellow. He is eighty-five years old now. We did not have a research group, only a development section in every division. In 1971 Yokogawa started a research and development center.

Aspray:

You were the first director?

Sugiyama:

Yes, that's right.

Aspray:

How many people were working in that group?

Sugiyama:

Forty-seven people.

Aspray:

How did the work in the new group differ from the way that it had been before? Was there more basic research now?

Sugiyama:

I selected some engineers from every division: Twenty people from the control instruments division, and twenty seven people from the measuring instruments division. The total was forty-seven. Their capability was more basic than other engineers.

Aspray:

I see that only one year later you received a prize. Can you tell me about that?

Sugiyama:

The Prime Minister Award for invention of pulse modulation technique in 1972.

Aspray:

Ah, from your dissertation.

Sugiyama:

Yes.

Aspray:

I see. This is a very prestigious award.

Sugiyama:

I think so.

Aspray:

Yes. I see that your career was rising very fast because you were appointed only one year later to the Vice President's position. What were your responsibilities as Vice President?

Sugiyama:

I was in charge of research and development and in charge of the total engineering group.

Aspray:

How large would this be? How many people?

Sugiyama:

It was around 600 engineers.

Aspray:

Oh, quite large. I understand that you must have had very good management skills as well as being an accomplished technical person. Did you ever take any training as a manager or did you learn on the job?

Sugiyama:

I don't know, but it's maybe a natural talent.

Aspray:

I see.

Sugiyama:

Excuse me. I would like to clarify one issue. In those days, Yokogawa didn't have a matrix system. There were many divisions. These divisions had the engineering group, a manufacturing group and the sales group. It's a functional corporate group with marketing, and R&D. This started with forty-seven members, and I controlled this engineering group.

Aspray:

I see, all across that whole engineering group.

Sugiyama:

Indirectly controlled.

Aspray:

Yes. I see. What were the great challenges at that time for you as a manager of R & D in engineering? What were the biggest problems you had to face and solve?

Sugiyama:

This matrix system is good, but actually it was very difficult, because the division's control was very strong and engineers did not understand what I thought. Number two was technology transfer from corporate R & D to engineering.

Aspray:

It was difficult?

Sugiyama:

Yes.

Aspray:

What kinds of methods, mechanisms did you use to transfer the technology?

Sugiyama:

Sometimes R&D engineers and division engineers got together and had a dinner in order to communicate with each other. In addition, we had presentation meetings to show the results of R&D to division engineers twice a year.

Matsumoto:

Dr. Sugiyama had some difficulty and he also mentioned that the manager in the R & D division were also faced with the same difficulty.

Sugiyama:

Yes, with many companies including NEC and Sony--we had a summer meeting with persons of the same position to discuss how to do technology transfer which was sponsored by Japan's Techno-Economics Society in 1970. But we could not find a good answer.

Aspray:

I see that in 1975 you received the Purple Ribbon Medal from the Japanese Government. Was that for all of your earlier work on inventions, or was it for your management work as well?

Sugiyama:

I don't know what is the reason I received this medal. But I believe this medal was usually awarded to excellent inventors. As you mentioned, I had already applied for more than 100 patents at that time.

Aspray:

One hundred by that time.

Sugiyama:

The total is 110, and around 1975 it was 80.

Aspray:

Please tell me what happened in your career after that.

Sugiyama:

I had stayed as the manager of R & D for three years and then I moved up to function leader in 1978.

Aspray:

I see--for all of the corporate functions.

Sugiyama:

Yes.

Aspray:

So you had administration and marketing and R & D, and whatever else?

Sugiyama:

It was 1978.

Aspray:

Your title then was Executive Vice President?

Sugiyama:

Yes. I wanted to expand Yokogawa business to be not only in control but also in other new fields. I tried to expand into office automation, OA.

It's a very big job, but I believed we could solve that. Many companies, including Sony and Canon joined in this office automation field. They were very strong and we stopped selling this kind of automation.

Aspray:

They were much larger companies and had more resources to put into this, I take it.

Sugiyama:

Yes. But the basic idea was from Yokogawa.

Aspray:

I see. Did you try some other areas also?

Venturing into Medical Technology with General Electric Company

Sugiyama:

Yes. One was the medical business, but I had very severe experience in the medical field. For example, we developed some new type of cardiograph in 1965, but we had only hardware introduced into the medical field. Doctors did not accept our hardware. "What's this Yokogawa company," they would ask. We found that we needed some marketing first and then we could introduce hardware. This is very important. Around 1976 Yokogowa Electric Corporation and the General Electric Company signed a contract to sell medical instruments.

Aspray:

You received a contract in 1976 to do some work on medical systems.

Sugiyama:

Yes.

Aspray:

What was the nature of this contract? What were you asked to do?

Sugiyama:

Sales contract.

Aspray:

It was sales. So they were supplying the technology and you were the introduction to the Japanese market.

Sugiyama:

Right. Around 1975, GE wanted to have a strong sales network in Japan. Almost thirty-five companies proposed to sell new CT system in Japan.

Matsumoto:

In 1975 they opened this operation. They wanted to sell the product inside of Japan, and thirty four companies applied to be their agent. Yokogawa was the last one to apply.

Sugiyama:

When General Electric executives visited Yokogawa they were impressed with Yokogawa Electric very much because Yokogowa had a very strong engineering power and had servicing capability.

Aspray:

I see. So because of the strength of the engineering group you could provide the technical service that was needed.

Sugiyama:

Yes. And from 1976, Yokogawa started to sell GE's X-ray CT in Japan.

Aspray:

What was the range of products?

Sugiyama:

Only the CT. Yokogawa Electric Works caught up the network over all hospitals. Many doctors suddenly knew what Yokogawa does. And then new joint venture began in 1982.

Aspray:

Why was it decided that the relationship should change and there should now be a joint venture rather than simply a contract?

Sugiyama:

Good question. At the starting point, GE's CT system was selling very well, but Japanese companies such as Toshiba and Hitachi began to make not so expensive, small X-ray CTs, which they introduced in Japan. And our markets share of the industry was beginning to drop rapidly. Yokogawa made up our mind to build some new CT for the Japanese market. At that time Mr. Sugita was in charge of this business. GE found that Yokogawa was now making a new CT system. GE said, "It's not good." If so, we should have some new joint venture that will sell both GE's one and Yokogawa's one.

Aspray:

Did GE find it was a very good system?

Sugiyama:

Yes. Syozo Yokogawa, President of Yokogawa decided to have a joint venture.

Aspray:

What was the ownership in the venture? Who owned what portion?

Sugiyama:

GE had 51% and Yokogawa 49%.

Aspray:

You were appointed to be the president when it was founded?

Sugiyama:

Yes.

Aspray:

What were your main challenges getting this new business going?

Sugiyama:

Frankly, I did not like this kind of arrangement.

Aspray:

I see.

Sugiyama:

But Shozo Yokogawa said, "you may have a good experience as a president of a joint venture. You may learn many things from GE." After a week I said, "Okay, I will do it as the president." The engineers, total number of employees was 333. Yokogawa Medical Systems started in 1982.

Aspray:

Were the engineers brought over from Yokogawa Electric?

Sugiyama:

Yes. Sixty engineers joined the new company.

Aspray:

I see. What did you get from General Electric? What did they provide? Did they provide any technology, or did they provide any financial help?

Sugiyama:

Maybe technology came from GE, especially since GE has a very nice software system. Premium systems were from GE. Conventional type ones and medium ones were from Yokogawa.

Aspray:

So that the top of the line was provided by GE and the rest of the products and product line was produced by Yokogawa?

Sugiyama:

Yes.

Aspray:

Did they share lots of parts and that sort of thing? Was there that kind of cooperation?

Sugiyama:

Components were separate. Then our products were exported to the United States using GE's network. It was a kind of OEM.

Aspray:

So they slapped their name onto your product, and used their marketing abilities and connections to sell it? But that was a good test of how it stood competition in those places. Right?

Sugiyama:

Yes. It was the same system that we used with MRI. The premium line was the GE line. We had a very strong team compared with Toshiba or Hitachi or Siemens.

Aspray:

Just to make sure that what you wrote on the board gets onto the tape, so for MRI the same thing happened. The top of the line product was produced by GE and the others were produced by YMS. That made for a very strong cooperative venture product line, better than Siemens and some of the other competitors.

Sugiyama:

Yes.

Aspray:

Who were the other competitors besides Siemens?

Sugiyama:

Philips and Picker, an American company. Philips is in Europe. But Siemens is very strong. GE is number one and number two is Siemens. Philips and Picker have smaller shares.

Aspray:

I see. Did the product line grow over time? I know now that you have a large number of products on the market. What was your strategy for growing the business?

Sugiyama:

The growing speed was faster than I expected. My plan was always delayed because the Japanese market was almost saturated with CT but is now expanding especially in the Asian division, especially since China and India want to have this kind of CT.

Aspray:

Lots of people want it. As soon as they can afford the advanced medical equipment, there's a great need for it.

But you also introduced new product lines, ultrasound for example, and were there some other new product lines as well?

Sugiyama:

We have ultrasound equipment, but the total sales volume is small because one unit price is not so high. Maybe one tenth of CT's price.

Aspray:

I can see how the products fall into the same kind of market. They're used for similar kinds of things by the users. Are the technologies that they're based on similar enough so that you could easily transfer your knowledge from building one kind of system to building another kind of them, from going to CT to MRI to ultrasound for example?

Sugiyama:

Basically, the MRI and CT and ultrasound are different technologies. But concerning MRI and CT, the console desks are using almost the same technology.

Aspray:

So you did have some economies of scale in the engineering in a way?

Sugiyama:

Yes, that's right.

Employing Toyota's "Just In Time" Model in Yokogawa Electric Works

Aspray:

How did you manage the rapid growth? What kinds of techniques did you use to enable yourself to grow so fast? You had to increase your number of employees and you changed buildings frequently. How could you make this rational and profitable as you grew so fast? What techniques did you use?

Sugiyama:

When the number of engineers is growing and they have been so busy, the employee's mind is very excited and there is no problem. On the other hand, when in a recession, the engineer is not so busy, is not excited, is discouraged, and is doing other things. Maybe the engineer cannot concentrate on how to make the target date.

Aspray:

As we were walking through the factory, you mentioned that you used a "just in time" system that was introduced by Toyota.

Sugiyama:

Oh, yes.

Aspray:

Was this something that was widely known or did you actually have to get assistance from Toyota or somebody else to set up your system for you? Did you go outside and get experience or was it just that it was a known system?

Sugiyama:

I want to explain. Around, I think, fifteen years ago, at Yokogawa Electric Works, Syozo Yokogawa came to know a person, Mr. Kinoshita. He established a new concept of a manufacturing system and some instructor joined this group. Its name was the NPS group, the New Product and System group. Many of the instructors came from Toyota. He brought some new production techniques into this group. His group taught us through lectures. We have learned from this teacher in Yokogawa Electric Work. YMS is using almost the same technique, this is basically Toyota's Kanbom System, the "just in time" philosophy.

Aspray:

Were you able to implement it smoothly? Were there major problems in introducing it into your business?

Sugiyama:

It was very difficult. Yokogawa Electric Corporation is an old company, especially the manufacturing employees are very against this new technology.

Aspray:

But it should have been easier to implement in a new company even if you had engineers that came over.

Sugiyama:

That is right. At this time Mr. Katagiri, who is a very strong leader, imposed his idea based on NPS with his efforts. After ten years, Yokogawa inventories go down. Maybe one third or one fourth of them.

Aspray:

Oh, a very great savings of money that way. So you've been very satisfied with the use of this system within YMS.

Total Quality Control System

Sugiyama:

Yes. Now I was satisfied with the system. However, recently I introduced a new system, a TQC system--Total Quality Control System. My friend, Mr. Uchimaru, who was a president of a NEC subsidiary, was retired, and he wanted to coach our company. An NPS system is only for manufacturing, but a TQC is a total quality control system.

Matsumoto:

I think you mentioned quality control is based upon the new technology for management. They propose activity in the company from the sales side to production to engineering and so on. So they said the system is not only limited to TQC, but also includes all the other activities---we have some directive measures and control measures. This time the company decided, i.e. the employer decided, for employing total quality control.

Aspray:

I see. When did you begin to implement this?

Sugiyama:

Two years ago YMS started policy management based on TQC. At first the president shows policy management (Hoshin Kanri), then, it is broken down to the manager's level.

Aspray:

What other important technology management lessons can we learn from YMS? What sorts of challenges did you have? What sorts of successes did you have? What were some of the big management issues that had to be faced in YMS and how were they resolved?

Sugiyama:

I didn't have a big management problem. I don't remember.

Aspray:

I see that in 1988 you were appointed as chairman.

Sugiyama:

Yes, that's right.

Three Pole System

Aspray:

What was the significance of that change? How did your duties change? How did it come about?

Sugiyama:

GE wanted YMS to grow more internationally. If so, the president should be from the GE side. GE decided this. GE already established a three-pole system. One pole is from Milwaukee in the United States. GE CGR is in Europe and in Russia. Yokogawa Medical System is the center of Asia. That is a three-pole system.

Aspray:

I see. So you divide the world into three parts and each of these divisions is responsible for that whole area.

Sugiyama:

Mr. John Trani was appointed as a division manager of Milwaukee. This is the number one reason the three-pole system is established. The chairman should be American or European. The second reason is stock share changed. Originally 51% is GE, but Jack Welch, the chairman of GE, required Syozo Yokogawa to change the share to 75% GE and 25% Yokogawa Electric Works. That means the interest of GE is getting strong.

Aspray:

Yes. What were your specific duties when you became chairman? How was labor divided? What responsibilities did you have?

Sugiyama:

In Japan, the chairman's duties, in general, are always lighter than the president. Mainly, I went outside and I met some hospital presidents or some major professors, and I went to the United States and other countries. The new president, Chuck Pieper, concentrated on company needs inside the company.

Aspray:

I see. So, the president was involved more with the everyday operations of the business?

Sugiyama:

Yes. Daily operations.

Aspray:

Did the chairman's duties involve long-term planning for new business areas?

Sugiyama:

Yes, and the chairman is director of the board meeting. The manager meeting is the president's responsibility. I don't attend the manager meetings.

Aspray:

Does the president sit on the board though?

Sugiyama:

Yes.

Aspray:

You held that position for three years?

Sugiyama:

Yes. Three years.

Aspray:

Then you were appointed as senior technical advisor. Is that right?

Sugiyama:

I was assigned as an advisor for YMS and an executive technological advisor for Yokogawa Electric Works. I have two hats now.

Aspray:

I see. Since 1991 what have your main responsibilities been? What are you looked to do as advisor?

Sugiyama:

I come to YMS two days a week and mainly a manager comes up to me for everything. For example, we are now starting some company merger. I was consulted about the strategy. Then the President goes to this company to discuss it. This is one kind of task.

Management and Decision Making Process in Yakagawa Electric Work

Let's discuss the questions of capital. In YMS you have this rapidly growing business. Where did you raise all the money to hire these new employees and build these new plants and expand so quickly?

Matsumoto:

He's not sure that this is accurate but he imagine all the earned money was gained from the profits.

Aspray:

So you're able to build from your revenue?

Matsumoto:

Yes.

Sugiyama:

Also borrow money from bank.

Aspray:

Toget a line of credit from a bank, did you have to put some bank officers on your board of directors?

Sugiyama:

No.

Matsumoto:

You see, it has to do with the profitability of YMS because, as you know, a bank does not want to loan to a company that does not produce profits.

Aspray:

But sometimes, especially with small companies, it's frequently common that bank officers worry about the management of the company because it's growing so rapidly. So they'll want to make sure that their investment is protected and they want a say on the board of directors. That happened, for example, recently in the ASCII Corporation. So one of the commercial banks in Japan now has, I think, two seats on the board of directors. But that was not the case here.

I have a question about Technical background. Either in YEC or YMS, when you come to a major decision, are they typically business decisions, are they technical decisions, or are they some combination of business and technical decisions? If they involve technology, what is the process used? Do you get advice from your senior R & D people about the decision? Just how does it take place?

Sugiyama:

When I was the president of YMS, the main decisions were made by the R & D manager. We only talk to him. Other business decisions were made by myself.

Aspray:

I guess it's more business decisions than a technical decision to enter a new field, for example to start your ultrasound business.

Sugiyama:

On big decision-making, we need some discussion with GE. For example, we have many kinds of MRI systems. There is a very strong one, 1.5 Tesla one is made by GE. YMS should ask what kind of strength the MRI system should they have? It's a very important strategy. We had to meet many times with the GE engineers and management. We flew to Seattle or Hawaii. It's very important. It takes around one year to make that decision. Once decided is not so difficult to the Yokogawa Medical Systems.

Aspray:

My next question concerns the kind of qualifications needed to become part of senior management. Suppose that a young engineer comes to work for the company and seems to be quite promising. Do you take special steps to move him or her around in the company to get the right background so that he or she is well prepared for a senior position? Do you purposely move them around?

Sugiyama:

At this point, GE has a very good system. We are now learning from this system at GE. GE's career-moving system. According to this system, for the first five years, the engineer stays at, for example, ultrasound technology. If he is a very excellent engineer, he could move to the MRI system, and after ten years he'll be a manager of this section.

Aspray:

Inthe United States, there's so-called "fast-tracking." That's where you move people through the system much more rapidly if they show great promise. It seems like it would be much more difficult to do within a Japanese company given the concern over the group of people that come in at a certain time and so on. Is that true that its more difficult to do "fast-tracking" in a Japanese company?

Sugiyama:

Yes. In Japan, it's very difficult because this kind of rapid jumping is not good for teamwork. But recently we are now introducing the American way. The American system is much better now.

Aspray:

I see. Are there ever examples of forty-five-year-old vice presidents? Could somebody move up the ladder that quickly?

Sugiyama:

Around ten years ago, it was very difficult in Japan for this to happen, but recently it has begun changing. For example, our managing director is forty-eight years old. But this causes no problem.

Aspray:

Let me turn to question six [in your written answers] about quality, maintainability, and reliability in products. I can see that in a medical system reliability is quite valuable, quite important.

Sugiyama:

Yes.

Aspray:

What kinds of methods did you use to insure the quality and reliability of your products? Did you use special techniques, whether they are management techniques or technical techniques, did you put in extra relations with the customer, or just what kind of things did you do?

Sugiyama:

One thing is recently introduced, some customer satisfaction movement. It's very important. We meet many customers, not only the doctor--also some nurses and some technicians. They ask what is our product quality. Sometimes they complain that "this is not good." If so, some engineer visits this hospital and discusses with this technician to understand what happened in this hospital and improves some service. Its very important to contact hospitals directly and to hear their complaints.

Aspray:

What about assembly? How do you assure quality of assembly?

Matsumoto:

I'll explain the basic idea. It is basically the idea of "just in time." The "just in time" basic idea is to make some required component only when it is required. In the old-time manufacturing industry, the employee usually makes ten or twenty quantities at a time. But under the "just-in-time" system, he makes only one part when required. From the standpoint with the production engineering, this is the old-time manufacturing start. First ten or twenty units are sent from the outside for cutting. Then they are sent to the storage man. Then process two people receive the three materials at that time to make an assembly. You can see this is old type of manufacture.

Aspray:

That's right.

Matsumoto:

But the new type of manufacturing based on "just in time" is a process where people receive one quantity from the store. And then, after the cutting has been made, they are sent to the center and processed.

Aspray:

So it doesn't go to storage, and so on.

Matsumoto:

Thus the elapsed time is shortened from here to here and from here to here. This is from the standpoint of the production engineering. How about the standpoint from the quality? This is a lot of production over the conventional way.For instance, one receives the three materials. Then process-one people make some assembly or some cutting and then send to storage between process one and process two. But when the process-two people find some difficulty or some malfunction, they have to know, "what was the reason?" But already the time has passed from process one to process two.

Because of the time lag the process-one people sometimes forget. They need to find what's the real reason. But, this is the case of one by one production. From the process-one people, the process-two people receive the cut material. When they find some difficulty or some faults they can make some necessary feedback at the time they find it. So they can take some necessary preventive action. One by one production makes the best quality. This is the same idea on which this process was carried out. So every assembly will be checked at the time by next process people.

Aspray:

I also noticed this morning when we were touring there was a place for customers to come in to check over their own products before they went out the door. Is that so that things can be fixed while they are there rather than be sent to the site and have to be sent back and such? That seems to be another step toward quality.

Sugiyama:

Yes.

Aspray:

You mention in your answer to question number eleven, the Tollgate System. Could you explain what that is to me?

Sugiyama:

The Tollgate system is the developing process. There are many kinds of check points. The Tollgate system is like paying money as you are going through the road. At each section we have some meeting and explain the development process and all managers say, "okay, go to the next step."

Aspray:

So this is part of the research planning process.

Sugiyama:

That's right. It's the GE Tollgate system.

Aspray:

I assume that that's a way of preventing a research group from going off in one direction for a long period of time, without staying on track for the company's needs.

Sugiyama:

We need some sort of a checklist.

Aspray:

Are there some sorts of group decisions made in terms of reviewing R & D programs and projects, or is it a particular manager that makes decisions? Who makes the reviews in the R & D system?

Sugiyama:

It's a top manager of R & D who decides "go" or "no go." That's a meeting where some marketing people join the meeting. Because marketing people's opinions are very important.

Aspray:

Right. So that you're doing research that's directed towards products that are needed. Out on the floor there was a discussion with one of the people who showed us around, and she said there weren't distinctions made in his area between technicians and engineers. What's the rationale for that?

Sugiyama:

Mr. Ibuka, former president of Sony, said the Japanese engineer has two hats. Sometimes he's a technician and sometimes he's an engineer. He said the Japanese engineer has two mindsets.

Aspray:

Does that have a particular advantage in the engineering design process?

Sugiyama:

I think, sometimes the engineer is only sitting at a desk, and doesn't want to day any practical job. But the technician does some soldering, wiring. The Japanese engineer needs both sides.

Aspray:

So you learn something from the soldering that you can use in your design work and vice versa.

Sugiyama:

That's right.

Aspray:

With regard to question number fourteen, on alliances with government, business, or academia, could you tell me more about how the relation with Keio University works. What is the relationship between the two of you, more specifically?

Sugiyama:

I know many medical doctors at Keio University. Also, Shozo Yokogawa graduated from Keio University. And many of Yokogawa's directors graduate from Keio University. Yokogowa Electric Works has a close relation with Keio University. For YMS we need some testing site for new products. Keio University is very important for us and we want to keep this close relation. Keio University is now using our imaging system. Not those of Toshiba or Hitachi.

Aspray:

Why would Keio University want to have you come there? What advantage do they get from the relationship?

Sugiyama:

Keio gains some new technology from GE and information from GE. GE learns some medical information from American medical doctors, which is a very important information route.

Aspray:

They also get to use the equipment at no charge in their research and in their diagnostics.

Sugiyama:

Yes. Somewhat at a low price.

Aspray:

So they like this as well. I suppose it also means that they get the newest technology?

Sugiyama:

Yes.

Aspray:

Do you actually have some of your engineers or research teams spend time at Keio University on site for periods of time?

Sugiyama:

Yes. Always one or two engineers or servicemen stay in Keio hospital.

Aspray:

On the next question, on qualifications for professional employees, you say that it's difficult to recruit highly qualified people. Is that because there's a shortage of electrical engineers today, or some other reason? [some inaudible tape]

Sugiyama:

No. We don't have suitable jobs in Yokogawa Medical System for graduates from a doctor's course.

Aspray:

I see. Do you need to have medical people working for your company or is it sufficient to have only engineers? Do you need both?

Sugiyama:

Only engineers. No medical doctors here.

Aspray:

Do you have trouble hiring good engineers?

Sugiyama:

Recently it has not been difficult because the company's name is getting famous in Japan.

Aspray:

I was very impressed as I walked through the building to see how much space and how much time is devoted to continuing education. Why is it that you should devote so many resources to that? What makes it so important to spend a lot of money on continuing education?

Sugiyama:

Our target is that 5% of total working hour is spent on continuing education.

Aspray:

That's more than lots of other companies spend. Some companies do very little training of their engineers. You think it has great value to your employees?

Sugiyama:

Yes.

Aspray:

Inplanning a new product, what is the expected life cycle time--development time?

Sugiyama:

It depends on product research. For example, CT is very short--only two or three years research time. In case of MRIs, it's maybe five years.

Aspray:

So you have to introduce new products in those lines that frequently. Typically, within the company, are you working on more than one generation of products? Are you not only working on the next product but the product after that at the same time in some sort of way?

Sugiyama:

Only the next generation's product.

Aspray:

For the future of YMS, do you think that it's more likely that the company is going to grow by expanding into international markets with the same product lines, or produce new versions of the same product lines, or instead introduce whole new additional product lines? Which is your strategy for growth?

Sugiyama:

We already established three poles: The CT, the MRI, and the ultrasound. An other one, the X-ray system, is still small. For brand-new fields, we are now exploring a PET system (Positron Emission Tomography). It shows some kind of brain activity. But it is a very expensive system. We are expecting that new technology. Another one is to detect brain MEG, (Magnetic Encephalo Gram) a kind of wave from the brain. It detects a magnetic field that we call the MEG. It is now in the research stage. We are conducting some tests at ETL (Electro Technical Laboratory).

Aspray:

Could you summarize for me what you think are the great advantages, but also the great disadvantages of being in a joint venture?

Sugiyama:

Good question. First of all, the advantage is that we receive new technology from GE. And our mindset is more international, maybe better than Yokogawa Electric Works. It is natural for us to have an international mind. Concerning export, is very natural to use GE system. As concerns the OEM export to United States, sales, and service departments can use the GE system. This is a great advantage for my company. Disadvantage. The market share change gives less influence to Yokogawa 75% of profit goes to GE. Only 25% goes to Yokogawa.

Aspray:

I see. So you really have to make a lot of money for Yokogawa Electric to make out well. Are there disadvantages over management styles or over those kinds of issues?

Sugiyama:

Another point is it takes so much time to decide some kind of issue. For example, we want to expand a factory some other place. We need permission from GE side and the Yokogawa side. And it takes a lot of time. Sometimes policy is different.

Aspray:

Are there very strong differences in the corporate cultures of the two companies that make it difficult for you to work between them?

Sugiyama:

At the first stage, I felt it strongly, this kind of corporate culture. Now I didn't feel so.Takashi Sugiyama - Written Answers (Prior to Interview)

1. What are the key elements to making your business run successfully?

(a) YMS (GE and YEC Group) has quickly introduced new products such as X-ray, CT, MRI (Magnetic Resonance Imager), and ultrasound equipment--applying current technology and matching it to the Japanese market. There has also been a trend of new instrument introductions into hospitals.

(b) GE and YEC got together to develop new instruments. GE recognized the autonomy of YMS in some areas. YMS emphasizes high reliability and quick development, while GE exhibits the current high technology oriented intention.

(c) Mr. Sugita, who was a former medical equipment business division manager at YEC developed the new market and name of the medical equipment business in Japan. GE's participation in YMS made the expansion of YMS business in the medical in Japan easy and quick.

2. In what ways are a technical background important in managing your company?

(a) Development engineers are able to work without anxiety, because top management whose background is engineering can understand the engineer's standpoint well.

(b) Customers easily accept technological explanations of the top manager when troubles occur with customers.

(c) YMS is a technology-oriented company, and if the top manager does not have a technology background, it is not easy for him to decide whether a development project should go or not.

(d) When the market size is rapidly expanding, as was the case with diagnostic imaging equipment in the 1980s, a new product which includes new technology is very important to expand company's share.

3. Are there specific experiences in your background that you find valuable in preparing you for senior management?

(a) Improvement of efficiency of product development in Engineering, two examples:

(1) In the developing process of ultrasound equipment, eight years ago, the sales manager requested a mechanical sector probe, but I decided not to employ a mechanical one but instead to employ an electronically controlled probe; now the mechanical sector probe has disappeared.

(2) On the way of developing MRI system, there were several kinds of magnetic field strength (0.2T, 0.3T, 0.35T, 1.0T, 1.5T). I agreed and understood well this decision, now GE (YMS)'s market share in the world is No.1. This strategic success and valuable decision was possible because of my technological background.

(b) In 1982 I was a senior managing director of Yokogawa Electric Corp. in charge of Engineering, and I moved to YMS as President. At the same time, 333 YMS employees moved to YMS, including 60 engineers. Surprisingly, those engineers joined this new company without anxiety. Their capabilities were better than average level. This shows the importance of the background of top management.

4. What qualifications are needed in your company to become a senior manager and why?

(a) Senior management who are in charge of Engineering, Servicing, Manufacturing, or Marketing have to have engineering background because YMS is developing some equipment applying brand new technology.

(b) In general, an engineer tends to concentrate on his own specialty and not to broaden his view. This type of engineer is not suitable to become a senior manager in the company. A senior manager needs to have a strong curiosity and to be aggressive for many kind of things.

5. How important to your company's livelihood are quality, maintainability, and reliability of products, and what means are used to achieve them?

(a) Since a medical diagnostic instrument directly examines patients, a breakdown of the machine has a sometimes fatal effect, so maintenance should be done quickly and reliably during the off-time of machine (midnight or early morning). Moreover, service-stations should be located within the distance of one-hour drive to every hospital, and be open all the time. (24 hours operating system.)

(b) The most important part of quality is image. The resolution of image determines whether the small heterogeneous matter exists or not, so a YMS product is designed with image-quality as the most important item.

7. How much do your employees need to know about the operations and needs of their customers in order to produce successful products?

Recently YMS developed a new mind-setting movement, that is, that our customers are not only medical doctors, but also nurses, technicians, and patients; and all employees, especially engineers and manufacturers, should know the opinion of all of these end customers. YMS collects questionnaires from customers several times a year and reflects the improvement in the next group of new products.

8. What differentiates your company's operation from your competitors in Japan and other countries?

Because YMS is a joint-venture with GE, YMS gets more information from the USA than its competitors, including European companies. A recent trend is that the center of medical business and academic study is moving from Europe to the USA. So YMS has advantages over its competitors in this sense.

9. What role does service play in your company's vitality? Is the company's strategy to provide services, provide products, or solve problems (no matter what mix or service and products is required)? What are the most important elements in achieving them?

I already mentioned the importance of service in section 6. In a broad sense, service includes improvement of old machines up to the level of recent machine, free of charge. That is the concept of "Continuum" of GE and means the relation with customer is not temporary, but continues for a long time.

10. Are these ways of achieving economic scale in research and production?

The GE medical system division has established a three-pole organization, consisting of the Americas (North and South), Europe (including Eastern Europe and all Russia), and Asia (India, East Asia, China, and Japan).YMS is supporting not only Japan but also the other two poles with YMS products. At the same time YMS imports the products from the other two poles. Thus YMS enjoys its scale market of products and can reduce manufacturing cost. YMS exports constitute 40% of total sales, and imports around 15%.

11. What commitment does the company make to research and development? How are they organized in your company? What are the key management issues associated with R&D?

(a) Total expense of R&D in a year is around 10% of product sales. Expense of R&D includes Patent Royalty paid to GE and other companies.

(b) The choice of research themes and their schedule control are important issues. The former one is decided under the system of worldwide product planning, in the total marketing meeting attended by representatives of all three poles. Schedule control is done by applying the Tollgate system. At each gate, design review is performed.The key management issue in R&D is not to start new themes, but to stop the running theme. The execution of stopping is difficult in general, however. Decision-making and understanding are responsibilities inevitable to senior managers.Total staff for R&D is 200, equal to 12% of total employees. Among them research members are around 20%.

12. What role do other manufactures and other industries (e.g. suppliers, assemblers, or service and system companies) play in the operation of your company? How does this affect your business practices?

Since YMS does not have a machine shop, it is totally dependent on outside manufacturers for mechanical components and processing. Many other electric and electronic components are also purchased from outside vendors in the world, according to the global sourcing plan of GE. The key components such as probes in ultrasound equipment and the X-ray detecting array are manufactured in our company. The total number of vendors associated with YMS is around 400.

13. What role does the government play in the operation of your company?

Prior to the new product introduction, a manufacturing company needs to get the license in accordance with PAL (Pharmaceutical Affairs Law of Japan) under MHW (Ministry of Health and Welfare). Other relations with government are the same as an ordinary Japanese company. There are no special strong control or limitation.

14. Are there other kind of alliances with government, business, or academia that affect the way your company operates?

(a) There are no special alliances with government, business, or academia. YMS keeps good relations with Keio University. Many of YMS's new products have been tested clinically at Keio University. Test results are published at the medical academic society with the name of Keio University.

(b) YMS has a special alliance with GE Medical System Group as a member of the three-pole system. This group exchanges information on competitors' status, technological news, or economical conditions of each geographic area.

15. What kind of qualifications (especially educational) do you seek in your professional employees, and is it difficult to locate and recruit highly qualified people for professional positions?

YMS usually hires people who graduate from the Master course as especially educated one. It is difficult to recruit highly qualified people. Occasionally, YMS hires a highly qualified specialist as a consultant. This might be someone who has already retired but who has many precious experiences in their special field.

16. What kind of continuing education do you provide for our employees and is it necessary and effective?

There are about 60 correspondence lecture courses at YMS, and every employee can select any kind of lectures. These courses are provided by professional institutes. Every year around 200 employees take these courses. The orientation course and T.L.P. (Technology Leadership Program) have just started.The feature of the educational system in the Japanese company is to educate the whole workforce (including the ordinary workers). On the other hand, the education system in the USA aims at the level of manager or leader.

17. How does raising of capital affect the company's operation?

When a company wants to start new business or to build a new facility, top management would not take an action such as raising capital in general. Top management of many Japanese companies would prefer to operate in the range of its existing capital or rent some funds from its main bank.

18. How free is the company to undertake long-term planning and avoid issues of short-term return in investment?

Our company (YMS) has two kinds of plans. One is a 3-year forecast (MRF) and the other is every year's one-year plan. After one year passes, the next three-year plan will be built. The longer plan is usually announced by the top manager at the beginning of a new fiscal year, but the content is not so concrete, but only indicates our long-term target or vision.In the case of more basic research, it takes longer to become key technology for YMS. YMS sometimes asks the help of GE CR/D or YEC R/D, depending on the content of the research.

19. What is the company's strategy for growth? e.g. to make new products, to enter new market niches on a regular basis, to make incremental improvements in products, to increase penetration in market niches in which the company already operates, or other strategies?

In the past ten years, innovative new products have been introduced in the medical diagnostic field. They are ultrasound equipment, X-ray, CT and MRI. The GE Group (including YMS) could follow this technology change and has introduced new products on a timely basis. After the new product was introduced, model changes or incremental improvements should follow in order to expand market share. As a total, 80% of development man-hours are usually spent for incremental improvement of products, 10% are spent for new products, other 10% are for special product development requested by salesmen and medical doctors.

20. How do you deal with the rapid changes that occur in your industry?

YMS has a relatively strong marketing staff. Marketing specialists carefully watch the market tendencies, where it is going and when applicable technology is available. Some specialists attend academic meetings to catch the new information from doctors. (A good example is kidney-stone smashing equipment). We have to pick up some of the new product candidates, and then engineers start development, supported by marketing.

21. What general management lessons can I learn from your company?

You can learn from our company three items:

(a) Education system in YMS. The YMS education system is for all employees. YMS wants to educate the whole workforce, including ordinary workers. On the other hand, GE (or other American companies) want to educate management-level employees who will be leaders in some divisions of their companies.

(b) International mind. All YMS employees try to have an international mind. In every stage of development, engineering, manufacturing, marketing, and even sales, the staff always thinks about other countries and they try to match the foreign countries' conditions.

(c) Technology-oriented company. YMS would like to win against competitors not with sales power or advertisements, but with the product's technological features.